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Advantages of RTO (Canada)


There are several potential advantages of going public through reverse takeover transaction. One of the biggest is better access to financing options. Usually private placement is conducted simultaneously with reverse takeover.  It will provide capital for company's future plan and projects and also fund the expenses of RTO. Public company that is reporting issuer has the opportunity to raise additional capital. Secondary offering require prospectus forms that are significantly shorter and are subjected to shorter review period by the Securities Commission in comparison to RTO transaction. Also, public companies are in more favorable position to obtain debt financing. If company complies with periodic reporting requirements it makes it more attractive to lenders and debt investors. Small and growing companies  in Canada also have lower listing requirements and less continuous disclosure obligations (TSXV and CSE).

Being public company provides greater liquidity for company's shares. Shares are naturally more marketable because there is regulated  and liquid market where company's shares are traded. By going public elimination of liquidity discount permits the company to obtain more money per new share from the new investors.In this way the valuation of investment is increased. Many shareholder in private companies expect that they will have considerable return after company goes public. In this way early investors can realize the appreciation of the value of their investment and make profit. The timing of this liquidity depends on the terms under which the initial shares were acquired (if there is no hold period realization of the value can be immediate).

Many companies provide incentives to employees by giving them stock options. This plan have been important for recruitment and retention tools for public companies. General opinion is that if employees have stake at the company that will encourage them to align their objectives and interests with those of the company. Owning tradable shares offers public company alternative currency for potential acquisition. This way you will be able to offer shares instead of cash if such opportunity emerges. If company is going public it almost always carries a certain amount of prestige and with it goes improved perception of the company, its financial stability and transparency. Public awareness may be also increased through press releases and analysis which will improve liquidity. Undergoing due diligence and other necessary requirements will surely improve company's position within industry and among competitors which can lead to favorable terms given by suppliers. Compliance with the requirements results in effective system, procedures and controls withing the company.
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